Too Many or Too Few People? Does the market provide an answer?

[My very first post on this LvMI-hosted blog. Also, I see this was my first “Avatar”-related piece.]

Dan McLaughlin asks the first of these interesting questions on the Mises blog, http://mises.org/daily/2718. The second question is mine, and I addressed it briefly in the blog responses to Dan.

I take the liberty of posting that response here (revised slightly and with a few further comments and emphasis):

Too many or too few? Good question, Dan. I agree with you that the population question is like any other aspect of the social order: best addressed by the market and by free societies.

There are just a few small problems – even within the developed world (and very clearly outside of it), there are many important resources that are unowned and thus not fully priced in the “market” economy.

Unowned resources include almost all of Nature. Primary productivity (the amount of vegetation produced from photosynthesis) has changed little, so as we use technology and our organizational abilities to divert more and more of it to feed us, this is an inevitable cost to other species, either directly or in the form of altered environments that support less life (and less diversity of life).

In altering our environments to suit us, we are of course no different from other life forms that compete for resources to live and propagate, but with our technical and organizational abilities, mankind has clearly triumphed over the rest of nature (except perhaps evolving microbes, to whom we represent an increasingly large and relatively untapped food source). But at what cost?

Through the centuries we have wiped out many wild systems of food and other resources – because they were never owned, and because our improving technology enabled us to race each other to take the resources before others (or from others, in the case of many native peoples). Not only Jared Diamond`s “guns, germs and steel”, but also forms of social organization have played deciding roles in the competition between human societies for survival, growth and dominance. In this regard, societies that recognize and protect property rights internally and utilize free markets have proven clearly superior in the competition with other societies to obtain and utilize available resources.

But our struggle has been not only to capture resources and to use them before others do, but also to manage and protect them effectively. Evolving ownership systems have been a key means of limiting wasteful “tragedy of the commons” struggles (see Yandle; von Mises), but even where ownership systems have been implemented, we have generally replaced complex natural systems with simpler systems designed solely to feed us (and particularly so where, due to higher consumptive demand, we have replaced common property systems with private property systems (Ostrom)).

Meanwhile, virtually all of the natural world – the world’s oceans, atmosphere, tropical reefs, tropical forests and other great commons – remain unowned and thus unmanaged and unregulated (or indigenous occupants have been forced aside). For example, the great cod fishery off of the Grand Banks that fed Europe for centuries has now disappeared, and other fishery stocks worldwide are crashing – to be “replaced” by “farmed” fish that are fed to a substantial degree by catching and grinding up fish stocks that humans prefer not to consume directly, and in part by fish firms that are established by destroying the mangroves that are estuaries to various fisheries. The same is true of the replacement of vast tracts of tropical forests with soybeans or oil palm plantations, with the rapid increase in atmospheric CO2 (and attendant risks to climate) and with the correspondly geolologically rapid increases in ocean acidification (and threats to plankton, corals and shellfish).

While populations in the developed economies are now relatively stable, demand from our markets (as well as the burgeoning developing markets) continues to strip out unowned (or mismanaged “public”) resources from the oceans or undeveloped countries, aided by kleptocratic elites who are happy to steal from the peoples they supposedly represent in order to line their own pockets.

As Dan points out, property rights failures in poorer nations contribute to population growth there by delaying the demographic transitions that we have experienced. Developed economies face similar problems with respect to “public”, state-owned lands, for which rent-seeking by and sweet deals to insiders are enduring problems and sources of politcal conflict (as markets cannot work to allocate resources).

Dan states that the stunningly rapid growth of human populations from the Renaissance to the present (6+ billion now expected to nearly double again soon) “actually represents the rise of capitalism and capital development … [and] shows … the stunning capacity of freedom to provide for the whole world.” While partly correct, this misses completely the question of our massive impact, within a very short period of geological time, on the environment in which we evolved over millions of years, the fact this has occurred because clear and enforceable property rights have not been created in many of the resources that have been consumed, and the corollary fact that we continue to lack the ability to manage our impact on our endowment of natural resources.

The market clearly does NOT send accurate pricing signals with respect to goods that are unowned or ineffectively owned; these goods are either unpriced or underpriced, so the effect is overconsumption until the point that the resource is greatly degraded, at which point attention is turned to the next unowned resource. Thus, human populations are responding to rather imperfect market signals. And where resources are unowned, individuals and groups with differing values and desires cannot adjust or realize those desires by means of private, market transactions. As a result, we are seeing a recourse to the public and political arenas – and the inevitable discordant debates – as various parties seek to use either moral suasion or the levers of government (locally, nationally and internationally) to advance what they consider to be their own interests. (Of course, in a “tragedy of the commons” situation, all resource users share an interest is the future availability of a resource; the difficulty is in the prisoners’ dilemma negotiations at the primary user level about how to allocate short-term pain in the interest of long-term gains, compounded in the case of multinational resources by rent-seeking with each national participant.)

A cynic may say that our ongoing assault on nature is only “natural”, presents no moral or philosophical issues and that we hardly owe any responsibilities to “nature” or even “future generations” – so let’s just all keep on partying, consuming for today, and patting ourselves on the back at how marvelous our market systems are. And that we should keep on hurling invective at those evil “enviros” who want to crash the party and drag us all back to the Stone Age.

Allowing homesteading is a classic libertarian response. It’s flaw is that it expects the government to do something that it rarely does – to get out of the way.

Perhaps a more realistic approach would be for the government to actively focus on “tragedy of the commons”-type situations, and to promote dialogue and private property solutions.

ITQs (individual transferable quotas) have already proved themselves to be a viable solution for most fisheries. In the case of seas within the 200 mile limit, the US can aggressively seek to realize ITQ regimes. Internationally, things are less settled as the applicable legal regime is not clear in which event we can try to establish a useful legal regime and can actively promote dialogue and discuss technology that would make it easier to establish property rights regimes for fisheries that are outside various nations’ exclusive zones.

I’m not sure if I understood well, but if I did the problem can be solved by alowing homesteading of parts of, let’s say, the ocean. The problem rises only because it is illegal, thus there is no incentive for obtaining more natural resources, thus making them part of the market system.

Besides, the market never sais what is to be done. It only tells you when you are wrong.